Senate Finance contemplates physician payment reform

The Senate Finance Committee recently released a white paper outlining where it sees opportunities to reform Medicare physician payment to improve the delivery of chronic care and improve the Physician Fee Schedule’s value to clinicians and beneficiaries.

Senators identified changes to Medicare fee-for-service (FFS) through the Physician Fee Schedule and value-based care initiatives in Medicare Part B aimed at reducing overall healthcare spending and improving outcomes for beneficiaries. They said that current payment strategies in both FFS and value-based care systems “may jeopardize a clinicians’ ability to own and operate a health care practice and meet patient needs.”

To improve Medicare FFS for physicians and ensure its sustainability, Senators floated changes to the Physician Fee Schedule’s conversion factor (CF) and budget neutrality. CMS uses the CF to set fee schedule rates for services covered by Medicare Part B, while Congress prevents spending increases of over $20 million through Physician Fee Schedule changes through a budget neutrality requirement.

However, physicians have encountered challenges with both the CF and budget neutrality adjustments. Specifically, the Physician Fee Schedule’s CF does not account for inflation like in other Medicare payment systems, which has led to an overall decline in payments over the last two decades as physician costs continue to increase. Then, CF changes often stem from budget-neutrality adjustments required by statute, including a 2.2% downward adjustment to the CF for calendar year 2024 when CMS implemented an add-on code for certain evaluation and management (E/M) visits.

Senators said the Finance Committee is interested in examining the CF’s role in updating Physician Fee Schedule rates and ways to update it “in a more predictable manner and by an amount that better accounts for shifts in input costs and other relevant economic dynamics.” They also expressed interest in refining the statutory budget-neutrality requirements to allow for more flexibility in calculating pricing adjustments for services while ensuring payment integrity.

The white paper also stressed the value of alternative payment models (APMs), such as the Quality Payment Program’s Advanced APMs (A-APMs), in addressing Medicare physician payment challenges.

In 2023, about 227,000 clinicians, or 17.0% of providers participating in the Quality Payment Program, received an A-APM incentive payment for engaging in a qualifying value-based care model. This incentive payment was larger than the greatest positive bonus adjustment in the Quality Payment Program’s other track, the Merit-Based Incentive Payment System (MIPS), making A-APMs an attractive option for providers. However, the incentive payment is scheduled to end, creating concerns about incentives to participate.

“The Committee is interested in exploring ways to improve and sustain meaningful incentives for A-APM participation, particularly if Congress pursues CF reforms that diminish or eliminate the current-law differential conversion factor updates for A-APM and non-A-APM participants,” Senators wrote in the white paper. “Ideally, policies to extend or expand financial incentives to participate in A-APMs should account for lessons learned from successful models and programs, as well as for providers with lower A-APM uptake, and such potential incentives must reckon with budgetary conditions and realities.”

Senators also suggested changes to MIPS, which has received criticism over how it reimburses for the value of care. Senators expressed concerns in the white paper about the “lack of improvement I patient outcomes and quality of care” through MIPS, spurring them to consider scaling back or repealing the program to “relieve physicians’ administrative burden and alleviate churn from A-APMs back to MIPS.”

Another way to potentially alleviate administrative burden is to create a hybrid payment model within the FFS system that would reimburse Medicare Part B providers using a per-beneficiary, per-month payment, Senators added. They also expressed interest in reforming A-APMs to reduce burden, particularly around using chronic care codes, since the models “have the built-in administrative infrastructure to alleviate some of the burden associated with additional primary care codes, such as through targeted, reduced cost-sharing to improve care coordination and decrease patient financial burden.”

“The way Medicare pays doctors for their work has not kept up with the times, and if it’s not working for doctors, it’s not working for the patients they help,” Senate Finance Committee Chair Ron Wyden (D-Ore.) said in a statement. 

Wyden said the paper is “an important step towards bringing Medicare into the 21st century, especially by acknowledging that the treatment and management of chronic conditions should be at the center of the program today. It’s critical that Traditional Medicare keep up, and this effort to update and strengthen the program for the next generation of Americans will make that a reality.”

Several industry groups, including the Medical Group Management Association (MGMA) and the National Association of Accountable Care Organizations (NAACOS), have applauded the Senate Finance Committee’s suggestions for physician payment reform.

“Paramount is the need for an annual physician payment update commensurate with inflation and modernization of the antiquated Medicare budget neutrality policies that can only be described as ‘robbing Peter to pay Paul,’”  MGMA’s Senior Vice President of Government Affairs Anders Gilberg said in a statement. “MGMA looks forward to working with the Committee to advance commonsense legislation that will begin to stabilize a Medicare reimbursement system that has long threatened the livelihood of our nation’s medical practices.”

NAACOS President and CEO Clif Gaus, ScD, said the group “supports considering alternatives to the current bonus structure, including ways to eliminate participation thresholds, and better updates than the current conversion factor. We look forward to working with the committee on reforming physician payment in ways that encourage more providers to participate in alternative payment models, including ACOs and other value-based care arrangements."